TSMC just posted one of the strongest quarters in its history. Revenue for the second quarter hit NT$1.27 trillion, about $40.2 billion, up 36% from a year ago and up 12% from the first quarter. Net income jumped 77% year-over-year to NT$706.6 billion, and earnings per share rose at the same pace to NT$27.25, or $4.31 per US-listed share. Profit is growing more than twice as fast as revenue, and that gap is the real headline.

The margins explain why. Gross margin came in at 67.7%, operating margin at 60.3%, and net profit margin at 55.6% — extraordinary numbers for a manufacturing business. TSMC is charging premium prices for its most advanced chips and customers are paying them without pushing back, a sign that demand is running well ahead of available capacity.

That capacity is concentrated at the cutting edge. Chips made on 7-nanometer or smaller processes, the kind that go into AI accelerators, smartphones, and high-performance computing, accounted for 77% of wafer revenue this quarter. The newest 2-nanometer node is still just 3% of sales but growing fast as it ramps, while 3-nanometer and 5-nanometer together make up nearly two-thirds of revenue.

What this means for AI and semiconductors

TSMC doesn’t design chips, it manufactures them for essentially every major chipmaker, including Nvidia, AMD, Apple, and Broadcom. That makes its results one of the cleanest windows into real, contracted demand across the entire industry, not just sentiment or stock prices. A 36% revenue jump with margins still expanding says the AI buildout is not slowing down at the manufacturing level, whatever chip stocks have done over the past few weeks.

It also confirms where the money is concentrated. With more than three-quarters of revenue coming from advanced nodes, the AI and high-performance computing boom is the dominant force in semiconductors right now, not a side story. Every AI chip sold by Nvidia or AMD depends on TSMC having the capacity to build it, and this quarter shows that capacity is being used at extremely profitable rates rather than sitting idle. TSMC served 534 customers and ran 305 distinct process technologies in 2025 alone, underscoring just how much of the global chip supply chain runs through a single company.

For a sector that just went through a sharp, valuation-driven selloff, this is meaningful evidence that the underlying demand story hasn’t cracked. Stock prices and fundamentals can disagree for a while. This quarter, the fundamentals look stronger than ever.